An inventory compliance audit is critical to running a successful business. The procedure exists to ensure alignment with state regulations and protects from theft by establishing well-documented uniform procedures.
An effective audit will include an inventory analysis, including each item’s cost and markup. Though the process can be time-consuming, it will provide deep insights into company accounts.
What Is the Importance of an Inventory Compliance Audit?
One of the most important aspects of running a business is ensuring accurate and up-to-date inventory records. With these records, leaders can manage their organizations and protect them. Otherwise, the company may be subject to penalties or fines.
Therefore, inventory audits are crucial for keeping inventory records up-to-date. The team should do these audits regularly to identify discrepancies and fix them before they become problems. Here’s why:
- Identifying problems early on makes it easier for businesses to solve them before they worsen.
- Properly maintaining inventory records helps organizations stay compliant with regulations — ensuring financial records represent the value of the inventory.
- Keeping accurate inventory records helps companies avoid paying excessive fees and fines associated with non-compliance with regulations — which can include paying higher insurance rates.
How Businesses Can Improve Compliance During an Inventory Audit
Inventory auditing is essential to maintaining a business’s compliance with industry standards. Companies can improve compliance during inventory audits by ensuring appropriate policies, procedures, and controls are in place. This will maintain the best records to support their inventory.
An organization needs to have a policy for instruction on controlling inventory. This policy should cover the items the business must include in the stock, how often to count and document it, where to store and record it, and any other relevant information about inventory control.
The policy should also cover who is responsible for counting inventory. It should state who is responsible for documenting any changes made to the count or value of stock and when they will record those changes.
Finally, companies can guarantee compliance by outlining how they’ll track their inventory through the different stages of production until it reaches its final destination. Having these policies and procedures ensures the stock and information are always accurate.
Best Practices for Conducting an Inventory Compliance Audit
Inventory compliance audits are the best way to ensure unnecessary costs are not occurring and compliance with the company’s regulations. With that in mind, some common mistakes can lead to an audit failing — or even getting rejected entirely.
1. Make a Plan of Action
Have a clear plan of action before beginning the inventory audit. Know what to check, who will be responsible for reviewing it, and how long it will take. Doing this ahead of time will help catch any errors early rather than waiting until they’ve become more serious.
2. Maintain Consistent Audits
Be consistent with how the team conducts their audits, as some items could go unchecked for weeks. This can make them ineligible for reporting purposes later down the road. If everyone checks everything regularly, they will quickly rectify gaps in the checking process.
3. Communicate Reports and Updates to Stakeholders
At the end of each inventory audit cycle, ensure communication with all stakeholders about what went well during the process and where there are opportunities for improvement going forward.
Maintain an Accurate Inventory Audit for Compliance
Businesses conducting an inventory compliance audit can use this procedure to ensure their inventory is up-to-date and accurate. Audits are a great way to determine whether or not the company’s policies are working and if there are any issues with how they manage inventory.
In conclusion, an inventory compliance audit is an integral part of any organization. It will help to use these best practices to conduct an audit. Doing so will offer the best chance of succeeding with compliant inventory management.
